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Hi Rodrigo! Yes, I'm aware of the analysis by Spence (1974). Actually, I had in mind another study, done by Rothschild and Stiglitz (1976). They showed that an insurance company, if it offers a "menu" of insurance policies with [View full text and thread]

Hi Rodrigo! Yes, I'm aware of the analysis by Spence (1974). Actually, I had in mind another study, done by Rothschild and Stiglitz (1976). They showed that an insurance company, if it offers a "menu" of insurance policies with [View full text and thread]

Hi, Brandon, I think it makes sense. Do you know Spence's model, where workers send a costly signal that helps firms to screen them? Only high quality workers are willing to send this signal, because they spent money acquiring good [View full text and thread]

"In credit card insurance, you usually have to pay for the first $100 or so of damages if the card is lost or stolen. Claims over this amount are absorbed by the credit card company. Discuss the rationale for this type of insurance"

I'm asked the above question. Here's what I think:Is it possible that there may be a case of the credit card company using "self-selection constraint" as an aid in screening to reveal private information?This "fine" to be borne by the person who lost the card is a mechanism so that only the low risk group would self-select to suscribe the credit card. This is also one way to reduce moral hazard.[Manage messages]